Hapag-Lloyd Operating Profit Rises 32 Percent

Container shipping firm Hapag-Lloyd said volume growth and a modest recovery in freight rates in the second half of 2018 helped push operating profit 32 percent higher, lifting shares in the German group on Monday.

Hapag-Lloyd said preliminary earnings showed operating profit before interest and tax (EBIT) rose 32 percent to 443 million euros ($502.81 million) in 2018, while earnings before interest, taxes, depreciation and amortisation (EBITDA) increased 83 percent to 1.138 million euros. Both results were at the upper end of the company’s expected range.

Shares in the shipping group were up 2.3 percent by 0918 GMT.

Shipping is slowly recovering from an oversupply of vessels that plunged the sector into prolonged slump, forcing some companies out of business and others to merge.

The company cited higher transport volumes, improving freight rates in the second half of 2018 and ongoing cost savings after a merger with rival UASC in 2017 for the improvement.

The UASC move made Hamburg-based Hapag-Lloyd the number five container shipper worldwide, amid ongoing consolidation.

The company said that bunker prices – the cost of shipping fuel – rose 18 percent to $421 a tonne from $318 previously.

Also, some activity in 2018 was artificially strong because operators pre-emptively brought forward some business to try and escape fallout from the looming tariff war between China and the United States, its chief executive said only recently.

Bigger sector peer A.P. Moller-Maersk last Thursday saw its shares prices shed more than 10 percent after warning that trade headwinds would slow growth this year.

But analysts at Bankhaus Lampe said in a research note that big players had confirmed that no new vessels will be ordered in the foreseeable future and this tightening of the fleet could play into their hands.

“In the light of robust demand we believe that Hapag-Lloyd will be successful in passing on (significantly) higher bunker prices to its customers,” analysts said.

Hapag-Lloyd is due to give provide a forecast for 2019 when it publishes full annual results on March 22.